The banks vs. the people

Say all you want about the power of government to jumpstart (or not) the economy in these unusual times, but from where I sit, at this moment in my life, the big banks are major culprits in keeping the economy hostage.  As usual, my own experience informs my opinion, so let me bring you into my economic life for a few minutes.

As most of my readers know, after 20 years in the corporate world, I now run two small businesses: one, social media consulting primarily for small business, and; two, growing a successful premium pet services company.  Service industry is a growing segment, and despite the terrible times, my pet services company is still growing with some good indicators for the rest of the spring and summer. 

After looking at commercial properties to open up an office outside of my home, I decided, instead, that the better path for me, at this time, was to sell my existing home and upgrade to a slightly bigger one to support my needs for the next 5 years.

Two things were necessary for me to take this step.  1) Get a mortgage pre-approval; 2) Find home inventory on the market.

And this is where I discovered, first-hand, that the banks are literally plugging up the economy, holding onto our money, and home inventory.

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All I wanted to do, in terms of getting a mortgage was to take the exact same mortgage and re-allocate the loan to a new house.  No more, no less.  I’ve held a mortgage with the same big bank for 10 years.  Refinanced twice to take advantage of lower rates.  Never missed a payment.  Paid thousands upon thousands of dollars in interest to this bank over 10 years.  Have a stellar FICO score and awesome credit report.  But the last time I refinanced, I was a corporate executive, with the prerequisit bi-weekly automatic deposit of my paycheck to my checking account.  Now, I’m a small business operator with a short, but consistent track record.

Did you guess it?  My big bank would not give me a mortgage.  The mortgage specialist, the same man I’ve worked with for 10 years, told me that while common sense would dictate that I should get a mortgage, bank guidelines would prevent it.

I was ultimately able to get a mortgage from another bank with a good reputation for working with small business, and I’ll be pulling all my business from bank #1 and giving it to bank #2,  but the stunning lack of common business sense just knocked my breath out for a few days.  If I’m at the top of the chain — growing business, great business skills, good income, excellent credit — then what about everyone else?  If getting a mortgage is problematic for me, what about everyone who falls just a touch shorter?  On top of that, because I didn’t USE all of my credit available from bank #1, they lowered my credit limit by 75%.  So as a small business, if I had a line of credit for $20,000, and wanted to expand, my credit was just lowered to $5K, which doesn’t amount to a  hill of beans.  I’m not personally concerned as I have relationships with multiple institutions and can get the credit I need from most other smaller banks, but if a big bank wants to clearly send a  “Hell-NO!” message (can’t help myself) to small business, then this surely is a way to do it.  I’m not mentioning any banks by name, but you can probably guess who I’m talking about.  It is the small business obstruction bank.

So now that the banking picture regarding small business becomes a bit clearer, onto selling and finding a new home.  There is extremely low inventory of homes on the market, because the banks are very slow to release them, thinking that by holding onto them it will help lessen the softening of the real estate market.  However, the homes that ARE available, are having trouble selling….because the buyers CAN’T qualify for home loans.  I can’t tell you how many homes I see every day that are in escrow and then fall out of escrow because the buyer couldn’t get a final approval on a home loan.  Surprisingly couldn’t qualify. 

I’m not sure yet what I want to do with my mortgage pre-approval letter.  I feel like I might be better off framing and hanging it, rather than using it.  And I may have to do that…we’ll see what happens when my home sells to the likely young couple who will want to buy it– if the prospective buyers can qualify for financing…if the banks decide they will release just a teensy little bit of money to help two families move forward a bit in this economy.

So, small wonder that  I’m a little reluctant to get too excited over the prospect of selling and finding a new home, because it is entirely possible that no one will qualify and I’ll have to stay in this home another 5 years.  THAT is what our broken financial picture is about at my pretty, suburban main street level.

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